most components for its assembly and generating a low economic multiplier effect.

Typical of maquila-type operations, this sort of situation is sometimes considered

resilient in isolating the local economy from external conditions, especially during
high volatility.
In retrospect, it is clear that external conditions initially foreclosed opportunities
that CINDE had developed to land other "flagship" projects. In fact, many firms
seriously looked at the country, and even made commitments to invest, but later
reconsidered. Since then, it can be argued that Intel and other high technology
investors may require a more developed support industry of international and local
vendors to enhance their supply chains and promulgate a full clustering effect.
Good examples of this sort of cluster are found in Shanghai, Malaysia, Singapore
and Ireland. Although it is clear that Intel was able to develop a supportive local
supplier base including a number of globally competitive suppliers after its initial
investment, investors may now expect the country to proactively foster growth in
investor-supplier networks. Typically, governments help to spur cluster growth by
facilitating key linkages, and by extending fiscal and regulatory relief to suppliers,
such as those offered through free zone schemes.

Challenges and Next Steps

Competitive Dynamics
As Costa Rica moves forward, its potential to attract and anchor FDI likely will
be shaped by a mutually reinforcing dynamic: an increasingly competitive environment for FDI among world locations heightened by fierce competitive pressures
for MNCs to lower their costs. Separately, there is a dramatic consolidation of
operations in South East Asia and China, due to the rapid growth of those markets,
costs that are half of those in the Americas, and better logistics. All these conditions
are creating a self-feeding ecosystem for technology manufacturing there, which
makes it more difficult for countries like Costa Rica to divert investment flows
and land them in their territories. Competition with these markets is a constant
struggle, through cost reduction, competitiveness and positioning. The fact that
Intel is constructing new A&T plants in Chinas Sichuan province would seem to
indicate adjustments in Intels site selection strategy emphasizing costs relative to
qualitative factors.

Building Advantage
In a constant effort to sustain and grow its investment, Intel Costa Rica has
looked for ways to better position itself within Intel International. By staying competitive, Intel management ensures the operation grows deeper roots, making
the investment more sustainable in the long term. As a result, Intel Costa Rica is
now focusing on activities of higher value and complexity, to help mitigate the fact
that its operation has higher labor costs than those of its Asian counterparts. This
explains the more recent incursion into services for export by Intel Costa Rica.
In spite of its competitive challenges, Costa Rica is considered to have real
potential to move up the value chain. The country has unique advantages: good
market/customer proximity, strategic shipping logistics via Atlantic or Pacific, an

INVESTING IN DEVELOPMENT INTEL COSTA RICA

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